Asked by Nicole Enabosi on Jun 01, 2024
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According to classical macroeconomic theory, changes in the money supply change nominal but not real variables.
Classical Macroeconomic Theory
An economic theory that posits that markets function efficiently and that full employment is achieved when economies operate at a state of equilibrium without government intervention.
Nominal Variables
Variables that are measured in terms of money and have not been adjusted for inflation, as opposed to real variables which are inflation-adjusted.
Money Supply
The total amount of money in circulation or in existence within a country's economy.
- Compare and contrast real and nominal variables, recognizing their relevance.
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Learning Objectives
- Compare and contrast real and nominal variables, recognizing their relevance.
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